January 3, 2017
Mortgage rates improved slightly to begin 2017, bringing them to the lowest levels in nearly a month, on average. December 8th was the last time rates were lower. During December, conventional 30yr fixed quotes were straying into the 4.375%-4.5% territory for many lenders. Now, nearly every lender is back down to 4.25% at least, with several already down to 4.125%. These rates assume a top tier scenario with no negative adjustments.
Today's victory was far from a given. That looked especially true this morning as bond markets got off to a weaker start (bond market weakness implies higher rates). Indeed, most lenders were slightly worse off this morning. Bonds improved, somewhat substantially, as the day wore on. Ultimately, most lenders repriced for the better (i.e. they saw enough market movement to move rates lower in the middle of the day). Keep in mind, mid-day price improvements will seldom result in a lower contract rate. Rather, the improvements are more likely to be seen in the form of lower upfront costs.
Loan Originator Perspective
Big week ahead with trading volume ramping back up after the holidays and important data like the national jobs/employment report on Friday. Market momentum is seemingly leveling off here, and perhaps turning in our favor. It's too early to discount what has transpired post-election. This could just as easily be a pause before the next move higher. I'd remain defensive/cautious until we see a more substantial confirmation that rates were building downward momentum. -Gus Floropoulos, VP, The Federal Savings Bank
Bond markets posted gains through mid day today, despite solid ISM data and no "end of month" demand (as compared with last week). The action is encouraging, hopefully indicating we've hit a short term ceiling for rates. It's certainly too early to pronounce an end to rising rates though, but at least pricing is improving. I'd definitely float till late PM if locking today, many lenders have repriced better as of early PM, but more are sure to follow. -Ted Rood, Senior Originator
Bonds are managing a decent rally off the lows of this morning. With the gains holding going into closing, I favor floating. I feel the risk is worth it to float to see if this trend can continue. If you do wish to lock, wait until as late as possible to allow your lender time to reprice for the better. -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0 - 3.5% depending on the lender
Ongoing Lock/Float Considerations
- Rates had been trending higher since hitting all-time lows in early July, and exploded higher following the presidential election
- Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm
- With the incoming administration's policies driving a large portion of upward rate momentum, mortgage rates will be hard-pressed to make significant improvements until after Trump takes office. Rates can move for other reasons, but it would take something big and unexpected for rates to move appreciably lower.
- We'd need to see a sustained push back toward lower rates (something that lasts more than 3 days) before anything less than a cautious, lock-biased approach makes sense for all but the most risk-tolerant borrowers.
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).